President Emmerson Mnangagwa has sailed through the impact of Covid-19 and Russia’s invasion of Ukraine. With several months away from Zimbabwe’s ... general election where he will be seeking another term, Mnangagwa is facing a bigger challenge that could further cripple the Zimbabwean ailing economy: a power crisis.
Since he took over from his father Gianluigi in 2014 as president of the Mediterranean Shipping Company (MSC), Diego Aponte has been frugal with his words. So the opportunity to talk for an hour in Geneva with the boss of the world’s leading shipping company is one that could not be refused.
Especially as the Italian-Swiss company has been constantly in the news since early this year. Not merely content with having overtaken Danish company Maersk to officially become the world’s leading shipowner in January 2022, MSC also confirmed on 31 March that, subject to approval by the regulatory authorities, it was taking over all port and logistics activities of Bolloré Africa Logistics (BAL), for a sum of €5.7 billion.
MSC has a rich history with Africa, since its first line opened in the late 1970s linking Antwerp to Mogadishu, and in 2016 the operator doubled the competition on the continent by being the first to dare to use 14,000 twenty-foot equivalent unit (TEU) ships to serve the West African coast.
By getting its hands on the continent’s leading port network, MSC is taking a new step in its international development, while remaining faithful to a port hub strategy that has proven its worth in Lomé, all while retaining a certain culture of secrecy that has not prevented the company from settling at the top of the maritime industry in just over 50 years.
The Bolloré group surprised the entire sector by confirming in October 2021 its intention to sell its African activities grouped under the BAL brand. How long have you been following this dossier at MSC?
Diego Aponte: The Bolloré and Aponte families have a long-standing relationship, which started with my father and Vincent, and continues between Cyrille and myself.
We had mentioned several times that, if the BAL facilities were put on the market one day, we would be interested in taking them over, and they knew it.
It was they who approached you at the end of 2021?
Yes, that’s more or less what happened, because of that long-standing relationship.
And so you seized the opportunity that was presented to you?
Yes, I did. Our sector is currently doing very well, and thanks to our continuous growth over the last few decades, we had the finances to carry out such an operation. In an international bidding environment, BAL’s facilities could have ended up in the portfolio of a private equity or sovereign wealth fund, and I don’t think that would have been a good option, either for the continuity of BAL’s business or for Africa.
For €5.7 billion, many believe that MSC got a good deal.
I’ve heard people say that we paid too much! I believe that both parties are winners in the end, at a price that I consider very fair for the Bolloré family and acceptable for us.
The Élysée Palace was said to have pushed for CMA-CGM to win the bid, while it wanted at all costs to avoid the Chinese company Cosco. MSC therefore seems to be the most satisfactory compromise solution for everyone…We are undoubtedly a very good solution for France, since BAL’s head office and all its staff remain in Puteaux, in the Paris suburbs. It is up to us to show that we are the best solution, especially for Africa.
What motivated MSC to carry out this operation?
Africa is an important part of MSC’s history. We are now number one in the global container market and are on our way to becoming the leader on the continent with the acquisition of BAL. This investment will ensure our growth across the continent by enabling us to rely on quality infrastructure to support the efficiency of our shipping operations.
We intend to continue what the Bolloré family has built in Africa…but we are not coming to exercise a monopoly on the continent
The productivity of African port terminals is fundamental for a ship owner like MSC. Our fear was that these facilities would be taken over by someone with a different vision, based on a strategy more focused on profitability than on productivity. With this operation, MSC confirms its interest in Africa, the continent of the future, whose potential is immense and whose economic, demographic and social development we want to accompany over the next few decades.
The agreement concluded on 31 March is still subject to the approval of a number of regulatory authorities?
Several jurisdictions are indeed concerned, mainly in Africa. The share purchase agreement that we signed still needs to be validated by certain competition authorities in West and East Africa, as well as in South Africa.
And what about the public authorities in the concessionary countries, do you need to reassure them of your intentions?
In some cases, we need the consent of the local authorities. So both BAL and MSC are planning to visit the various authorities over the next few months to obtain their approval, but also to present ourselves and explain our vision. Port concessions remain strategic for these countries, whose GDP and economic growth depend on their terminals. It is therefore imperative that everyone is comfortable with our arrival and convinced that we are coming for the right reasons.
What will you tell them?
That we intend to continue what the Bolloré family has built in Africa, while explaining that we are not coming to exercise a monopoly on the continent. Our group has a good reputation, and we are taking over a portfolio that is already very well managed, which we intend to improve wherever possible. MSC’s custom is to grow its business, not to see it stagnate.
Is this takeover in line with the vertical integration logic so dear to shipowners investing in air or land logistics these days?
Everyone has their own strategy. Ours is based on major investments to improve the productivity of the terminals and therefore of our maritime lines and not just to make profits. Our main activity remains maritime, and it is on board our ships that we must achieve our financial results. In the current context of rising oil prices, the productivity of the ports is even more important.
A new brand and a new logo will be introduced.
Our ambition is therefore to make all these terminals as productive as possible so that our ships remain in port as little as possible. This is the industrial logic of a shipowner, not necessarily that of a port operator.
How will the integration of BAL into the MSC group work?
We will continue to manage these facilities with the aim of serving our customers in all their diversity, while keeping BAL as an independent company within the group. We will keep the staff and management as they are today, the latter being accountable to a new shareholder who will be called Aponte and no longer Bolloré.
A new brand will be created in the short term, with a new logo – which we’ll disclose at a later date. But we don’t intend to integrate BAL into MSC, rather to find the synergies that will be put in place with our subsidiaries to avoid duplication and over-investment in certain facilities.
Are you already thinking of selling some of the assets in BAL’s portfolio?
No, we are interested in everything, even concessions whose potential may seem limited. We will try to revive terminals that are not performing well by doing everything we can to bring them more volumes through our shipping lines. By having a leading port and land network across the continent, we will be able to intensify our maritime presence and thus strengthen Africa’s connectivity with the rest of the world.
Are you really interested in rail concessions?
We have real rail expertise in Europe for freight, but not for passengers, so we’ll have to get into the nitty-gritty of how to improve services very quickly. But we intend to keep them, to develop them through investment, so that we have an efficient tool that can accompany the development of our activities. It is a very complicated sector, especially when it is not backed up by a regular shipping line. I am convinced that we can quickly add value to the existing networks. It’s up to us to find the best synergies so that one plus one can make three when possible.
How do you plan to organise yourselves in Lomé, where the two operators will belong to MSC?
Our aim is not to have a dominant position that could penalise one player or another. There is a port authority whose role is precisely to regulate and ensure that everyone can operate normally in its docks. The terminal managed by BAL will retain its operational independence, with a general director in Lomé reporting to the CEO in Puteaux, as is currently the case. The two entities will not be in competition, but rather will complement each other.
With transhipment, the size of the volumes handled at the Lomé Container Terminal (LCT) prevents us from being able to serve shipowners other than MSC. They therefore go to BAL’s facilities, and there is no reason for this to change. We will not exert any influence on commercial policy and tariffs, on the management of the terminal, to ensure that there is a real differentiation between the two port operators.
The actual sale is announced for the end of the first quarter of 2023. Is this the time needed to complete the whole process?
We have decided to give the authorities the time they need. There is no question of rushing things, but rather of taking all the time necessary to conclude this transaction as best as possible. I am confident that everything will be completed before the end of this year, depending on the decisions taken by the regulatory authorities.
The Bolloré Group’s development has always been based on a unique network of influence throughout the continent. Do you think you have such a network in Africa today?
The Aponte family is certainly not as well known as the Bolloré family in Africa, but MSC is recognised throughout the world, and therefore on the continent, as one of the main integrated transport operators. Our industrial strategy must resonate with the expectations of African governments, as it consists of improving land, port and rail infrastructures.
Influence is built on the confidence and professionalism that an operator demonstrates in the management of infrastructures that are fundamental to the economic development of countries and therefore of the continent. In this sense, our vision should be in line with that of the African authorities.
This takeover operation came at a time when BAL was experiencing some legal difficulties in Lomé and Conakry and contractual difficulties in Douala. What was MSC’s approach to these issues during the negotiations?
These are problems inherited from another era, which were managed by the Bolloré group. MSC is taking over a very well organised group with high standards that will be further reinforced by our arrival. As for the Douala dossier, there is one reality that must be taken into account: that of having won the call for tenders in 2020, whereas we still do not have the keys to the terminal today.
All we had to do was shake hands over lunch to definitively ratify the agreement.
I hope that the takeover of BAL will give us the opportunity to talk with the Douala port authorities so that they honour their part of the contract so that our subsidiary, Terminal Investment Limited (TIL), can quickly take over the management of the quays which are its responsibility.
You mentioned earlier the relationship between the Bolloré and Aponte families. Did this play a role during the negotiations?
There is a real relationship of friendship and respect between our two families, which explains why the discussions went so smoothly. We carried out an audit in three months, which was only possible through mutual trust. The work was greatly facilitated, I think I can say, by the fact that the Bolloré family was not ready to sell to just anyone, but to the person who could guarantee continuity in the group’s activities.
When did this relationship start?
Our two fathers have known each other for more than thirty years and during this period they have maintained more or less regular – but always constant – contact, especially when Bolloré also owned the shipping company Delmas. MSC has been an important client of Bolloré’s for a very long time, both in terminals and in transit.
I have known Cyrille personally for many years, which enabled us to conduct the negotiations in complete confidence, under the equally confident eye of our respective fathers. All we had to do was shake hands over lunch to definitively ratify the agreement we had just negotiated.
The year 2022 started off with a bang for MSC as, in addition to acquiring Africa’s largest port network, in January the company became the world’s largest container carrier in just over 50 years of existence. What does this mean for MSC and its founder Il Capitano [Diego’s father Gianluigi Aponte]?
It was obviously a great pleasure for him, but it also gave us a legitimate sense of pride. We have indeed grown tremendously, thanks to our vision and the work of our 110,000 employees around the world, to whom I dedicate this achievement.
Your growth so far has been mainly organic. With this first external acquisition, are you inaugurating a new strategy?
Not at all. Our strength has been to grow internally. This is our DNA and we must respect it. Now, the fact that we have cash allows us to make certain investments, but always correlated to our industry and with the objective of strengthening the group, not diluting it. Hence our interest in the privatisation of ITA Airways in Italy.
Will this position as world leader push you to open up the books a little more, along with the group’s capital?
There is no change to be expected in this respect. We have the good fortune and the luxury of being a private company, and it is not because we have become number one that we are going to communicate our figures and reveal our strategy. We’ve been through some tough times, but we’ve always come through without having to go to the markets. This is an advantage that we intend to keep.
We will certainly not return to pre-pandemic shipping rates, which were too low and defied all logic
How did you get through the pandemic period in particular?
We have always ensured the continuity of our operations. The situation was very worrying during the first wave of Covid in Asia, because overnight we had a 17% drop in our cargo business while the cruise business collapsed. This made us realise that when China closes its factories, there is nothing left to carry. Once they were reopened, the effect was immediate and multiplied.
We had to deal with an explosion in global demand for the transport of consumer goods. So all the shipowners had to be very nimble and make everything that was floating available. The whole world realised the importance of the maritime sector in the global economy. Nobody really knew about us, even though over 90% of international trade is carried out by sea.
This explosion in demand has led to a very high increase in freight rates over the past year. Do you think that this is the end of the ‘happy globalisation’ which, for thirty years, has been based on very low transport costs?
We will certainly not return to pre-pandemic rates, which were in any case too low and defied all logic, especially in view of the investment needs of shipowners. The flows will change a little, but the West will not re- industrialise. Europe and the United States cannot compete with products manufactured today in Asia. Africa certainly has a role to play in this, if it succeeds in its industrialisation as I want to believe.
Today, we are faced with terminal congestion, particularly in the United States, amplified in some cases by the lack of port manpower. So our services are slowed down, ships and containers are moving slower, meaning more are needed, but there are none. Rates are still high at the moment, but from 2023 onwards a lot of new capacity will come on to the market.
MSC alone is due to take on more than 800,000 TEU of additional capacity over the next few years. In anticipation of what?
The improvement of some of our existing services and the development of new shipping lines. We will also take the opportunity to retire our older ships. The idea is to have more capacity on a modernised fleet, particularly with a view to decarbonising ships.
Almost all of the ships that we will soon be receiving should run on liquefied gas. Our goal is zero net emissions by 2050. To get there, we are continuing to study other alternative fuels, in collaboration with the energy sector and other industries.
Who will pay for the tens of billions needed to decarbonise the world fleet?
Shipowners will do everything technically necessary since we have no other choice, but the cost of these investments will be borne by our customers, who will ultimately pass them on to consumers.
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